What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2021-11-09 · 188 added, 309 removed, 228 unchanged (69% of the section changed)

7 unchanged sentences

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “assumption” or the negative of these terms or other comparable terminology.

Forward-looking statements in this current report include, among others, statements we make regarding

• our ability to successfully integrate new operations, to our business and the anticipated benefits to be derived from our investments, acquisitions, and joint ventures;

• anticipated trends in our revenues, operating expenses and liquidity and cash flows, including our financial guidance and anticipated effects of cost-savings efforts;

• the ongoing impact of the COVID-19 pandemic on our business, suppliers, payors, customers, referral sources, partners, patients and employees, including (i) government’s unprecedented action regarding existing and potential restrictions and/or obligations related to citizen and business activity to contain the virus;

(ii) the consequences of an economic downturn resulting from the impacts of COVID-19 and the possibility of a global economic recession;

(iii) the impact of the volume of canceled or rescheduled procedures, whether as a result of government action or patient choice;

(iv) measures we are taking to respond to the COVID-19 pandemic, including changes to business practices;

(v) the impact of government and administrative regulation, guidance and appropriations;

(vi) changes in our revenues due to declining patient procedure volumes, changes in payor mix;

(vii) potential increased expenses or workforce disruptions related to our employees that could lead to unavailability of key personnel;

(viii) workforce disruptions related to our key partners, suppliers, vendors and others we do business with;

(ix) the impact of return to work orders in certain states in which we operate;

and (x) increased credit and collectability risks;

Forward-looking statements in this quarterly report include, among others, statements we make regarding:

• anticipated trends in our revenues, operating expenses or capital expenditures, and our financial guidance;

• expected future market acceptance for our products or services, and the anticipated protection afforded by our competitive strengths in the markets we serve;

• potential timing and impact of changes in regulations impacting our business;

• the ongoing impact on our business, suppliers, payors, customers, referral sources, partners, patients and employees of the COVID-19 pandemic;

• the anticipated effect of the measures we are taking to respond to the COVID-19 pandemic

• our ability to successfully acquire and integrate new imaging operations;

• cost savings, efficiencies and improvements anticipated from our investments in artificial intelligence and machine learning products and services;

• our future liquidity and our continuing ability to service and remain in compliance with applicable debt covenants or refinance our current indebtedness.

Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements.

Factors that might cause such differences include, but are not limited to, the factors included in “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, 2020 or supplemented by the information in Part II– Item 1A below.

Forward-looking statements are neither historical facts nor assurances of future performance.

Because forward-looking statements relate to the future, they are inherently subject to known and unknown risks, uncertainties and other factors that are difficult to predict and our of our control.

Our actual results, level of activity, performance or achievements may be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forwards-looking statements.

Important factors that could cause our actual results to differ materially from those indicated or implied in our forward-looking statements include the factors included in “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, 2021 or supplemented by the information in Part II– Item 1A below.

You should consider the inherent limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements.

These forward-looking statements speak only as of the date when they are made.

We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Any forward-looking statement in this quarterly report is based on information currently available to us and speaks only as of the date of this report.

We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this quarterly report or any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this quarterly report, except as required by law.

We are a leading national provider of freestanding, fixed-site outpatient diagnostic imaging services in the United States based on number of locations and annual imaging revenue.

At September 30, 2021, we operated, directly or indirectly through joint ventures with hospitals, 350 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

Our centers provide physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders and may reduce unnecessary invasive procedures, often reducing the cost and amount of care for patients.

Our services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.

In addition to our imaging services, we own and operate a number of technology businesses that are complementary to our imaging business.

Our subsidiary eRAD, Inc., develops and sells computerized systems for the diagnostic imaging industry, which provide the technology to distribute, display, store and retrieve digital images.

We have made a number of investments in Artificial Intelligence (AI) with our purchases of Nulogix and DeepHealth, combined with our investment in Whiterabbit.ai and our collaborative arrangement with Hologic.

Our current AI focus is to develop solutions in machine learning to assist radiologists and other clinicians in interpreting images and improving patient care, initially in the field of mammography.

We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our facilities.

The following table shows our facilities in operation and revenues for the nine months ended September 30, 2021 and September 30, 2020:

Nine Months Ended September 30,

Facilities in operation 350 334

At March 31, 2022, we operated, directly or indirectly through joint ventures with hospitals, 351 centers located in Arizona, California, Delaware, Florida, Maryland, New Jersey, and New York.

Our operations comprise two segments for financial reporting purposes for this reporting period, Imaging Centers and Artificial Intelligence

Our Imaging Center segment provides physicians with imaging capabilities to facilitate the diagnosis and treatment of diseases and disorders.

Services include magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), fluoroscopy and other related procedures.

The vast majority of our centers offer multi-modality imaging services, a strategy that diversifies revenue streams, reduces exposure to reimbursement changes and provides patients and referring physicians one location to serve the needs of multiple procedures.

Included in the segment is our eRad subsidiary, which designs the underlying critical scheduling, data storage and retrieval systems necessary for imaging center operation.

Our Artificial Intelligence ("AI") segment that has been established through our acquisitions of DeepHealth, Nulogix Aidence Holding B.V.

and Quantib B.V..

Our current AI focus is to develop solutions that employ machine learning to assist radiologists and other clinicians in interpreting images and improving patient care, initially in the fields of brain, breast, prostate, and pulmonary diagnostics..

We derive substantially all of our revenue, directly or indirectly, from fees charged for the diagnostic imaging services performed at our centers.

The following table shows our centers in operation and revenues for the three months ended March 31, 2022 and March 31, 2021:

Three Months Ended March 31,

Centers in operation 351 346

Net revenues (millions) $ 342 $ 315

2 unchanged sentences

In addition, our experience with capitation arrangements over the last several years has provided us with the expertise to manage utilization and pricing effectively, resulting in a predictable stream of revenue.

Our total service revenue during the nine months ended September 30, 2021 and 2020 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Our total service revenue during the three months ended March 31, 2022 and 2021 are presented in the table below based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in thousands):

Three Months Ended March 31,

Commercial insurance $ 188,465 $ 182,096

4 unchanged sentences

Management fee revenue 5,508 5,219

Teleradiology and Software revenue 2,564 2,349 7,611 8,319

Software revenue 3,399 2,426

AI revenue 599 —

Other 5,647 2,622

3 unchanged sentences

Recent Developments

The discussion of our results below centers on our performance through the third quarter ended September 30, 2021.

During the same period in 2020, with the onset of the novel strain of the coronavirus ("COVID-19"), we began experiencing reduced procedure volumes at the end of the first quarter which intensified through mid year.

In response to the pandemic, we adjusted our business operations, inclusive of concentrating patient traffic to larger imaging centers, negotiating payment terms with vendors and landlords, initiating employee furloughs, compensation reductions, and telecommuting.

As 2021 comes to a close, our procedure volume has returned to pre-COVID-19 levels and our business has resumed normal operations.

We expect that the cost saving measures implemented in 2020 will continue to be beneficial to our financial position in 2021.

In addition, we have continued to invest and position for future growth.

Year to date, we have acquired 19 new radiology centers in California, New Jersey and New York.

As 2022 begins, our procedure volumes remain strong.

Our acquisitions of Aidence Holding B.V.

and Quantib B.V.

have expanded our AI initiatives to encompass imaging diagnostics solutions for the most prevalent cancers.

We have also opened five centers through a combination of acquisition and internal development.

Equity Investments, Acquisitions and Dispositions, and Joint Venture Activity

2 unchanged sentences

Equity Investments

As of September 30, 2021, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

As of March 31, 2022, we have three equity investments for which a fair value is not readily determinable and therefore the total amounts invested are recognized at cost as follows:

Medic Vision Imaging Solutions Ltd., based in Israel, specializes in software packages that provide compliant radiation dose structured reporting and enhanced images from reduced dose CT scans.

Our investment of $1.2 million represents a 14.21% equity interest in the company.

No observable price changes or impairment in our investment was identified as of September 30, 2021.

No observable price changes or impairment in our investment was identified as of March 31, 2022.

Turner Imaging Systems, based in Utah, develops and markets portable X-ray imaging systems that provide a user the ability to acquire X-ray images wherever and whenever they are needed.

1 unchanged sentence

On January 1, 2019 we funded a convertible promissory note in the amount of $0.1 million that converted into an additional 80,000 shares effective December 21, 2019.

No observable price changes or impairment in our investment was identified as of September 30, 2021.

No observable price changes or impairment in our investment was identified as of March 31, 2022.

WhiteRabbit.ai Inc., based in California, is currently developing an artificial intelligence suite which aims to improve the speed and accuracy of cancer detection in radiology and improve patient care.

On November 5, 2019 we acquired an equity interest in the company for $1.0 million and also loaned the company $2.5 million in support of it operations.

No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of September 30, 2021.

Facility acquisitions

During 2021, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses.

The primary reason for these acquisitions was to strengthen our presence in the New York City, New Jersey and California markets.

No observable price changes, impairment in our investment or impairment of the loan receivable was identified as of March 31, 2022.

Imaging Center

During the first quarter of 2022, we completed the acquisition of certain assets of the following entities, which either engage directly in the practice of radiology or associated businesses.

The primary reason for these acquisitions was to strengthen our presence in the Maryland market.

These acquisitions are reported as part of our Imaging Center segment..

We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Intangible Assets Other Assets Right of Use Liabilities

Personal Health Imaging PLLC* 2/1/2021 2,995 576 608 2,355 50 14 (608)

ZP Elmont LLC* 2/1/2021 2,194 1,112 — 1,005 50 27 —

ZP Freeport LLC* 2/1/2021 6,065 4,668 — 1,328 40 29 —

Broadway Medical Imaging LLC* 2/1/2021 1,155 1,076 446 6 50 23 (446)

3235 Hempstead LLC* 2/1/2021 9,386 5,667 — 3,649 70 — —

SLZM Realty LLC* 2/1/2021 13,671 4,617 — 8,974 80 — —

2012 Sunrise Merrick LLC* 2/1/2021 11,428 2,741 335 8,617 70 — (335)

ZP Bayside LLC* 3/1/2021 3,545 3,385 2,191 40 50 70 (2,191)

ZP Laurelton LLC* 3/1/2021 2,658 2,530 1,418 32 50 46 (1,418)

ZP Smith LLC* 3/1/2021 3,978 3,581 2,214 347 50 — (2,214)

ZP 907 Northern LLC 4/1/2021 562 507 1,817 5 50 — (1,817)

Kelly MD, Inc.

5/1/2021 3,750 990 1,379 2,710 50 — (1,379)

60th Street MRI, LLC 5/1/2021 400 85 — 290 25 — —

ZP Parkchester LLC 5/1/2021 263 213 311 — 50 — (311)

ZP Eastern LLC 6/1/2021 2,868 2,801 1,951 17 50 — (1,951)

Tangent Associates LLC** 8/24/2021 2,025 10 — 379 1,636 — —

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Right of Use Liabilities

IFRC LLC*^ 1/1/2022 4,800 2,103 857 2,697 (857)

IFRC LLC*^ 1/1/2022 8,200 2,910 1,703 5,271 (1,703)

Total 13,000 5,013 2,560 7,968 (2,560)

*Fair Value Determination is Final

** All stock purchase through issuing 67,658 shares of our common stock

Formation of majority owned subsidiary

On January 1, 2021 we entered into the Simi Valley Imaging Group, LLC, a partnership with Simi Valley Hospital and Health Services ("Simi Adventist").

The operation will offer multi-modality imaging services out of two locations in Ventura County, California.

Total investment in the venture is $0.4 million.

RadNet contributed $0.3 million in assets for a 60% economic interest and Simi Adventist contributed assets totaling $0.1 million for a 40% economic interest.

Sale of ownership interest in a majority owned subsidiary

Effective September 1, 2021 we completed the sale of a 24.9% ownership interest in our majority owned subsidiary West Valley Imaging Group, LLC for $13.1 million to Tarzana Medical Center, LLC.

After the sale, our ownership interest in the subsidiary has reduced from 75.0% to 50.1% and we retain a controlling financial interest in the subsidiary.

We recognized in additional paid in capital on our condensed consolidated balance sheets, $4.2 million excess in consideration over the carrying value of the sold economic interest.

Post the sale of our ownership interest we acquired from Tarzana Medical Center, LLC, certain intangible business assets for purchase consideration of approximately $5.2 million.

^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, one of which was purchased separately by a joint venture with Calvert Medical Imaging Centers, LLC.

Artificial Intelligence

Aidence Holding B.V.

On January 20, 2022, we completed our acquisition of all the equity interests of Aidence Holding B.V.

("Aidence") an artificial intelligence enterprise centered on lung cancer screening, in an combination stock and cash purchase.

Aidence is reported as part of our artificial intelligence segment and was acquired to enhance our AI capabilities.

The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $45.2 million including i) 1,117,872 shares issued at $26.80 per share with a fair value of $30.0 million ii) cash of $1.8 million and iii) assuming liabilities of $11.9 million, $7.4 million in milestone contingent consideration and cash holdback of $4.5 million and iv) a settlement of a loan from RadNet of $1.5 million.

In addition we paid certain seller closing costs through the issuance of 23,362 shares at a fair value of $0.6 million.

We preliminarily recorded $1.0 million in current assets, $0.2 million in property plant and equipment, $27.5 million in intangible assets, $3.2 million in liabilities and $19.2 million in goodwill.

On January 20, 2022, we completed our acquisition of all the equity interests of Quantib B.V.

("Quantib") an artificial intelligence enterprise centered on prostate cancer screening, in a combination stock and cash purchase.

Quantib is reported as part of our artificial intelligence segment, and was acquired to enhance our AI capabilities.

The transaction was accounted for as an acquisition of a business and total purchase consideration was determined to be approximately $42.3 million including i) 965,058 shares issued at $26.80 per share with a fair value of $25.9 million ii) cash of $11.8 million and iii) 113,303 shares with a fair value at the date of close of $3.0 million and cash holdback of $1.6 million to be issued 18 months after acquisition subject to adjustment for any indemnification claims.

We preliminarily recorded $2.4 million million in current assets, $0.1 million in property plant and equipment, $21.3 million in intangible assets, $3.7 million in liabilities and $22.2 million in goodwill.

As we finalize our estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months).

The initial accounting is incomplete as of March 31, 2022 for the acquired assets and liabilities as we are currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination.

The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities and intangible assets, along with the opening working capital accounts, which could have a material impact on our results of operations and financial position.

Joint Venture Activity

The following table is a summary of our investment in joint ventures during the nine months ended September 30, 2021 (in thousands):

During the first quarter of 2022, our joint venture with Calvert Medical Imaging Center, LLC, completed the acquisition of certain assets to strengthen our presence in the Maryland market.

We made a fair value determination of the acquired assets and assumed liabilities and the following were recorded (in thousands):

Entity Date Acquired Total Consideration Property & Equipment Right of Use Assets Goodwill Right of Use Liabilities

IFRC LLC *^ 1/1/2022 3,922 2,121 1,295 1,801 (1,295)

*Fair Value Determination is Final

^ IFRC LLC acquisitions consisted of three subsidiaries of IFRC, two of which were purchased separately by wholly owned RadNet subsidiaries.

The following table is a summary of our investment in joint ventures during the three months ended March 31, 2022 (in thousands):

Balance as of December 31, 2021 $ 42,229

Equity in earnings in these joint ventures 2,517

Equity contributions in existing joint ventures 1,441

Balance as of September 30, 2021 $ 44,228

We charged management service fees from the centers underlying these joint ventures of approximately $5.3 million and $2.7 million for the three months ended September 30, 2021 and 2020 and $16.0 million and $8.6 million for the nine months ended September 30, 2021 and 2020, respectively.

On June 23, 2021, we made an additional equity contribution to our joint venture in Arizona of $1.4 million.

Our equity ownership interest percentage in the venture did not change.

The following table is a summary of key balance sheet data for these joint ventures as of September 30, 2021 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):

Balance as of March 31, 2022 $ 44,746

We charged management service fees from the centers underlying these joint ventures of approximately $5.5 million and $5.2 million for the three months ended March 31, 2022 and 2021, respectively.

The following table is a summary of key balance sheet data for these joint ventures as of March 31, 2022 and December 31, 2021 and income statement data for the three months ended March 31, 2022 and 2021 (in thousands):

Balance Sheet Data:

September 30,

2022 December 31,

7 unchanged sentences

Total value of RadNet joint venture interests $ 44,746 $ 42,229

Income statement data for the nine months ended September 30,

Income statement data for the three months ended March 31,

Net revenue $ 34,411 $ 31,718

10 unchanged sentences

and our reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods.

These estimates involve judgments with respect to numerous factors that

are difficult to predict and are beyond management’s control.

These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management’s control.

As a result, actual amounts could materially differ from these estimates.

13 unchanged sentences

Revenue under capitation arrangements is recognized in the period in which we are obligated to provide services to plan enrollees under contracts with various health plans.

Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended September 30, 2021.

Our estimates and assumptions related to revenue recognition did not change materially for the quarter ended March 31, 2022.

Provider Relief Fund (COVID-19 Stimulus Funding)

The Provider Relief Fund offers government assistance to eligible providers throughout the healthcare system in support of certain expenses or lost revenue attributable to the coronavirus pandemic.

We have recorded provider relief funding in our condensed Consolidated Statements of Operations in the amount of $6.3 million for the nine months ended September 30, 2021.

We have recorded provider relief funding in our condensed Consolidated Statements of Operations in the amount of $6.2 million for the three months ended March 31, 2021.

No provider relief funding was received for the three months ended March 31, 2022.

Generally, the department of Health and Human Services ("HHS") does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of provider relief funding one has received.

2 unchanged sentences

In recognizing revenue associated with provider relief funding our management is required to assess whether our operations have meet the applicable requirements for the funding received.

During the quarter ended September 30, 2021, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.

During the quarter ended March 31, 2022, we continued to evaluate our operating results in light of the most recent government guidance and based on our assessment, the amount of revenue recognized is appropriate.

Accounts Receivable

1 unchanged sentence

Services are generally provided pursuant to one-year contracts with healthcare providers.

Receivables generally are collected within industry norms for third-

party payors.

Receivables generally are collected within industry norms for third-party payors.

We continuously monitor collections from our payors and maintain an allowance for bad debts based upon specific payor collection issues that we have identified and our historical experience.

Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended September 30, 2021.

Our estimates and assumptions for allowances on our account receivable did not change materially during the quarter ended March 31, 2022.

Business Combination

7 unchanged sentences

Goodwill and Indefinite Lived Intangibles

Goodwill at September 30, 2021 totaled $502.7 million.

Indefinite Lived Intangible Assets at September 30, 2021 were $7.1 million and are associated with the value of certain trade name intangibles.

Goodwill at March 31, 2022 totaled $570.2 million.

Indefinite Lived Intangible Assets at March 31, 2022 were $13.2 million and are associated with the value of certain trade name intangibles.

Our management reviews the fair value of our reporting units on an annual basis to determine if an event has occurred which suggest that the fair value of a reporting unit may be impaired.

2 unchanged sentences

We tested goodwill for impairment on October 1, 2021.

We also continue at regular intervals to consider the current and expected future economic and market conditions surrounding the COVID-19 pandemic and to date have not had an indication of goodwill impairment being more likely than not through September 30, 2021.

Recent Accounting Standards

1 unchanged sentence

Results of Operations

The following table sets forth, for the three and nine months ended September 30, 2021 and 2020, the percentage that certain items in the statements of operations bears to total service revenue, inclusive of revenue under capitation contracts.

The following table sets forth, for the three months ended March 31, 2022 and 2021, the percentage that certain items in the statements of operations bears to total service revenue, inclusive of revenue under capitation contracts.

AND SUBSIDIARIES

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Service fee revenue 88.7 % 88.7 %

8 unchanged sentences

Total operating expenses 100.5 % 96.4 %

INCOME FROM OPERATIONS 9.8 % 8.0 % 7.9 % 1.9 %

(LOSS) INCOME FROM OPERATIONS (0.5) % 5.6 %

OTHER INCOME AND EXPENSES

2 unchanged sentences

Non-cash change in fair value of interest rate hedge (6.1) % (3.6) %

Debt restructuring and extinguishment expenses

— % — % 0.6 % — %

Other (income) expenses (0.1) % — % 0.2 % — %

Total other expenses 1.8 % 3.2 % 2.3 % 4.3 %

INCOME (LOSS) BEFORE INCOME TAXES 7.9 % 4.8 % 5.7 % (2.3) %

(Provision for) benefit from income taxes (1.6) % (1.3) % (1.3) % 0.7 %

NET INCOME (LOSS) 6.4 % 3.5 % 4.4 % (1.7) %

Other expenses — % 0.1 %

Total other income (3.4) % (0.2) %

INCOME BEFORE INCOME TAXES 2.9 % 5.8 %

Provision for income taxes (0.4) % (1.4) %

NET INCOME 2.4 % 4.4 %

Net income attributable to noncontrolling interests 1.6 % 1.4 %

NET INCOME (LOSS) ATTRIBUTABLE TO RADNET, INC.

NET INCOME ATTRIBUTABLE TO RADNET, INC.

COMMON STOCKHOLDERS 0.9 % 3.0 %

We have developed our medical imaging business through a combination of organic growth, equity investments, acquisitions and joint venture formations.

Results of Operations

Imaging Center Segment

We have developed our medical imaging centers segment through a combination of organic growth, equity investments, acquisitions and joint venture formations.

We have segregated some of our information to demonstrate which is attributable to centers that were in operation through the entirety of the comparison period, and which is attributable to those that were acquired or disposed of during the period.

The discussion below shows a breakdown and analysis of revenue and expenses for the three and nine months ended September 30, 2021 and 2020 for our operations at a total company and same center level.

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

The discussion below shows a breakdown and analysis of revenue and expenses for the three months ended March 31, 2022 and 2021.

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Total Revenue inclusive of Provider Relief funding where applicable for 2022 and 2021

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Revenue 2022 2021 $ Increase/(Decrease) % Change

1 unchanged sentence

Same Center Revenue $314,705 $305,892 $8,813 2.9%

Excluded $26,462 $15,675 — —

Upswing in revenue reflects an overall same center 6.2% growth in total procedure volumes over the same period in the prior year as business continues to return to pre-COVID-19 levels.

On a same center basis, with Mammography procedures rising 6.4%, and advanced radiology procedures of MRI, PET and CT, expanding at a combined 23.6%, revenue increased over the same period in the prior year.

This same center comparison excludes revenue contributions from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $24.4 million.

For the three months ended September 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $4.7 million.

On a same center basis, with routine imaging procedures rising 5.6%, and advanced radiology procedures of MRI, PET and CT, expanding at a combined 7.9%, revenue increased over the same period in the prior year.

Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $6.2 million for the three months ended March 31, 2021.

Excluded amounts refer to revenue contributions for the three month periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested between January 1, 2021 through March 31, 2022.

Operating Expenses

Total operating expenses for the three months ended September 30, 2021 increased approximately $31.5 million, or 11.7%, from $268.6 million for the three months ended September 30, 2020 to $300.1 million for the three months ended September 30, 2021.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended September 30, 2021 and 2020 (in thousands):

Total operating expenses for the three months ended March 31, 2022 increased approximately $34.7 million, or 11.5%, from $302.6 million for the three months ended March 31, 2021 to $337.3 million for the three months ended March 31, 2022.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended

September 30,

Salaries and professional reading fees, excluding stock-based compensation $ 196,962 $ 177,204

10 unchanged sentences

* Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended September 30, 2021 and 2020 (in thousands):

The discussion below provides additional information and analysis on changes in our various operating expenses for the three months ended March 31, 2022 and 2021 (in thousands):

Salaries and professional reading fees, excluding stock-based compensation and severance

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Salaries and Professional Fees 2022 2021 $ Increase/(Decrease) % Change

1 unchanged sentence

Same Center Salaries $182,278 $168,535 $13,743 8.2%

Stemming from the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology procedures, resulting in a nominal increase in salaries and professional fee expense over the same period in the prior year.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $13.1 million.

three months ended September 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was approximately $3.7 million.

Excluded $14,684 $8,669 — —

Stemming from the higher procedure volumes noted above, our staffing levels were adjusted to support the influx of patients seeking radiology procedures.

In addition, we face inflation in employee cost similar to the general economy as demand returns to pre-Covid levels.

Excluded amounts refer to salaries and professional reading fees for the three month

periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested between January 1, 2021 through March 31, 2022.

Stock-based compensation

Stock-based compensation increased $2.4 million, or 114.0% to approximately $4.4 million for the three months ended September 30, 2021 compared to $2.1 million for three months ended September 30, 2020.

This increase was a combination of awards valued at $8.9 million in stock compensation expense for employee COVID-19 related bonuses and higher fair value of RSA’s awarded and vested in the first quarter of 2021 as compared to RSA’s awarded and vested in the prior year’s first quarter.

Stock-based compensation increased $2.6 million, or 32.9% to approximately $10.4 million for the three months ended March 31, 2022 compared to $7.8 million for three months ended March 31, 2021.

This increase was driven by the higher fair value of RSA’s awarded and vested in the first quarter of 2022 as compared to RSA’s awarded and vested in the prior year’s first quarter.

Building and equipment rental

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Building & Equipment Rental 2022 2021 $ Increase/(Decrease) % Change

1 unchanged sentence

Same Center $24,425 $25,462 $(1,037) (4.1)%

The overall increase in building and equipment rental expenses was related to centers acquired through our business combinations, as same center expense remained stable.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $6.3 million.

For the three months ended September 30, 2020, building and equipment rental expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was approximately $1.5 million.

Excluded Sites $5,198 $3,249 — —

The decrease in building and rental expense relates to reduced equipment rental expenses relating to operating lease contracts which ended or were bought out during 2021.

Excluded amounts refer to building and equipment rental for the three month periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested between January 1, 2021 through March 31, 2022.

Medical supplies

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Medical Supplies Expense 2022 2021 $ Increase/(Decrease) % Change

1 unchanged sentence

Same Center $14,505 $13,229 $1,276 9.7%

Medical supplies expense increase relates to the growth in overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increase in revenue over the same period in the prior year.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.9 million.

For the three months ended September 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.2 million.

Excluded Sites $1,052 $741 — —

The rise in Medical supplies expense corresponds to higher patient volume combined with price increases for contrasting agents used in advanced radiology procedures.

Excluded amounts refer to medical supplies expense for the three month periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested between January 1, 2021 through March 31, 2022.

Other operating expenses

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Other Operating Expenses 2022 2021 $ Increase/(Decrease) % Change

1 unchanged sentence

Same Center $52,326 $50,521 $1,805 3.6%

Other operating expenses remained flat due to the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors from repair and maintenance to professional services.

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, other operating expense from centers that were acquired or divested subsequent July 1, 2020 and excluded from the above comparison was $5.1 million.

For the three months ended September 30, 2020, other operating expense from centers that were acquired or divested subsequent to July 1, 2020 was $1.3 million.

Excluded Sites $5,285 $2,816 — —

Other operating expenses increase relates to one time settlement charge for telecom contracts being phased out as part of a change in service provider.

Excluded amounts refer to other operating expenses for the three month periods ending March 31, 2022 and March 31, 2021, respectively, from centers that were acquired or divested between January 1, 2021 through March 31, 2022.

Additional segment operating and non operating expenses:

In Thousands Three Months Ended March 31,

2022 2021 $ Increase/(Decrease) % Change

Depreciation and amortization $25,806 $22,569 $3,238 14.3%

In Thousands Three Months Ended September 30,

Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change

Total $24,606 $21,247 $3,359 15.8%

Same Center $21,749 $20,443 $1,306 6.4%

This same center comparison excludes expenses from centers that were acquired or divested subsequent to July 1, 2020.

For the three months ended September 30, 2021, depreciation expense from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $2.9 million.

For the three months ended September 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to July 1, 2020 and excluded from the above comparison was $0.8 million.

Gain on sale and disposal of equipment and other

We recorded losses on the disposal of equipment and other items of approximately $2.6 million for the three months ended September 30, 2021 and approximately $0.3 million for the three months ended September 30, 2020.

Non-cash change in fair value of interest rate hedge

We recorded a gain of $2.9 million for the ineffective portion of our 2019 Swaps for the three months ended September 30, 2021 and a expense of $0.7 million for three months ended September 30, 2020.

We recorded other income of approximately $0.2 million for the three months ended September 30, 2021 and $0.1 million for the corresponding period ending September 30, 2020.

Severance costs

We incurred severance expenses of $0.2 million for the three months ended September 30, 2021 and $0.6 million for the three months ended September 30, 2020.

Loss (gain) on disposal of equipment and other $1,154 ($1,307) $2,461 nm

Non-cash change in fair value of interest rate hedge ($20,819) ($11,245) (9,575) nm

Other expenses $661 $7 $654 nm

Severance $201 $285 (84) (34.6)%

nm= not meaningful

Interest expense

In Thousands Three Months Ended September 30,

In Thousands Three Months Ended March 31,

Interest Expense 2022 2021 $ Increase/(Decrease) % Change

6 unchanged sentences

***Includes interest related to our term loans, revolving credit line,notes, finance leases and other.

Excluding the effect of interest expense related to derivatives and amortization for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, interest expense decreased $0.7 million, or 8.0%.

The reduction in interest expense corresponds to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt based on market conditions.

Excluding the effect of interest expense related to derivatives and amortization for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, interest expense decreased $0.7 million, or 9.3%.

The reduction in interest expense is attributable to a lower base rate that that was negotiated as part of an amendment to our senior credit facilities which reduced the effective interest rates on our term loan and revolving credit facilities as compared to the same period last year.

Based on recent increases in global interests rates, we expect the effective interest rates on our senior credit facilities, and our related interest expense, to rise in the near term.

See “Liquidity and Capital Resources” below for more details on our credit facilities.

2 unchanged sentences

Equity in earnings from unconsolidated joint ventures

For the three months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $2.9 million and for three months ended September 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $2.3 million, an increase of $0.6 million or 25.4%.

The increase was mainly related to the equity in earnings received from our interest in the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.

Income tax provision

We recorded income tax expense of $5.3 million, or an effective tax rate of 20.0%, for the three months ended September 30, 2021 compared to income tax expense of $3.8 million, or an effective tax rate of 27.2% for the three months ended September 30, 2020.

The income tax rates for the three and nine months ended September 30, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

(ii) effects of state income taxes;

and (iii) excess tax benefits attributable to share-based compensation.

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Total Revenue inclusive of Provider Relief funding for 2020

In Thousands Nine Months Ended September 30,

Revenue 2021 2020 $ Increase/(Decrease) % Change

Total Revenue $988,219 $789,601 $198,618 25.2%

Same Center Revenue $913,503 $768,383 $145,120 18.9%

Increased revenue reflects an overall same center 25.0% growth in total procedure volumes over the same period in the prior year as business returned to pre-COVID-19 levels.

Total Provider Relief funding used to offset lost revenue due to the pandemic and included in the above amounts was $6.2 million for the nine months ended September 30, 2021 and $25.7 million for the nine months ended September 30, 2020.

This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 1, 2020.

For the nine months ended September 30, 2021, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $74.7 million.

For the nine months ended September 30, 2020, net service fee revenue from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $21.2 million.

Operating Expenses

Total operating expenses for the nine months ended September 30, 2021 increased approximately $135.5 million, or 17.5%, from $774.8 million for the nine months ended September 30, 2021 to $910.3 million for the nine months ended September 30, 2020.

The following table sets forth a breakdown of our cost of operations and total operating expenses for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Salaries and professional reading fees, excluding stock-based compensation $ 515,227 $ 429,292

Stock-based compensation 21,566 10,144

Building and equipment rental 91,253 80,148

Medical supplies 42,246 33,812

Other operating expenses *

168,316 154,700

Cost of operations 838,608 708,096

Depreciation and amortization 71,273 64,536

(Gain) loss on sale and disposal of equipment (279) 543

Severance costs 715 1,647

Total operating expenses $ 910,317 $ 774,822

* Includes billing fees, office supplies, repairs and maintenance, insurance, business tax and license, outside services, telecom, utilities, marketing, travel and other expenses.

Salaries and professional reading fees, excluding stock-based compensation and severance

In Thousands Nine Months Ended September 30,

Salaries and Professional Fees 2021 2020 $ Increase/(Decrease) % Change

Total Salaries $515,227 $429,292 $85,935 20.0%

Same Center Salaries $478,215 $417,280 $60,935 14.6%

The increase in salaries expense was a result of a return to normal pre-Covid19 levels of business.

Staffing levels have been adjusted to support higher patient volumes with the corresponding rise in salaries and professional fee expense.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the nine months ended September 30, 2021, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $37.0 million.

For the nine months ended September 30, 2020, salaries and professional reading fees from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $12.0 million.

Stock-based compensation

Stock-based compensation increased $11.4 million, or 112.6% to approximately $21.6 million for the nine months ended September 30, 2021 compared to $10.1 million for nine months ended September 30, 2020.

This increase was driven by the higher fair value of RSA’s awarded and vested in the nine months of 2021 as compared to RSA’s awarded and vested in the prior year’s same period.

In addition, we granted awards valued at $8.9 million in compensation expense in employee COVID-19 related bonuses during the first nine months of 2021.

Building and equipment rental

In Thousands Nine Months Ended September 30,

Building & Equipment Rental 2021 2020 $ Increase/(Decrease) % Change

Total $91,253 $80,148 $11,105 13.9%

Same Center $75,434 $74,877 $557 0.7%

The increase in building and equipment rental expenses was related to centers acquired through our business combinations, as same center expense remained steady.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the nine months ended September 30, 2021, building and equipment rental expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $15.8 million.

For the nine months ended September 30, 2020, building and equipment rental expenses from centers that

were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was approximately $5.3 million.

Medical supplies

In Thousands Nine Months Ended September 30,

Medical Supplies Expense 2021 2020 $ Increase/(Decrease) % Change

Total $42,246 $33,812 $8,434 24.9%

Same Center $39,752 $33,019 $6,733 20.4%

Medical supplies expense increase stems from the overall procedural volumes noted above compared to the same period in the prior year and is consistent with the percentage increase in revenue.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the nine months ended September 30, 2021, medical supplies expenses from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $2.5 million.

For the nine months ended September 30, 2020, medical supplies expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $0.8 million.

Other operating expenses

In Thousands Nine Months Ended September 30,

Other Operating Expenses 2021 2020 $ Increase/(Decrease) % Change

Total $168,316 $154,700 $13,616 8.8%

Same Center $152,932 $148,840 $4,092 2.8%

The minimal increase in other operating expenses were mitigated by the cumulative effect of successful contract re-negotiations in the prior year aimed to reduce charges across a range of vendors.

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the nine months ended September 30, 2021, other operating expense from centers that were acquired or divested subsequent January 1, 2020 and excluded from the above comparison was $15.4 million.

For the nine months ended September 30, 2020, other operating expense from centers that were acquired or divested subsequent to January 1, 2020 was $5.9 million.

Depreciation and amortization

In Thousands Nine Months Ended September 30,

Depreciation & Amortization 2021 2020 $ Increase/(Decrease) % Change

Total $71,273 $64,536 $6,737 10.4%

Same Center $63,957 $62,267 $1,690 2.7%

This comparison excludes expenses from centers that were acquired or divested subsequent to January 1, 2020.

For the nine months ended September 30, 2021, depreciation expense from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $7.3 million.

For the nine months ended September 30, 2020, depreciation and amortization from centers that were acquired or divested subsequent to January 1, 2020 and excluded from the above comparison was $2.3 million.

Loss on sale and disposal of equipment and other

We recorded a gain on the disposal of equipment and other items of approximately $0.3 million for the nine months ended September 30, 2021 and a loss on the disposal of equipment of approximately $0.5 million for the nine months ended September 30, 2020.

Non-cash change in fair value of interest rate hedge

We recorded a gain of $14.1 million for the ineffective portion of our 2019 Swaps for the nine months ended September 30, 2021 and an expense of $4.5 million for the nine months ended September 30, 2020.

Other (income) expenses

We recorded other expense of approximately $7.7 million for the nine months ended September 30, 2021 mainly related to our refinancing of our term loan debt and the change in fair value of contingent consideration.

We recorded other income of approximately $0.2 million for the nine months ended September 30, 2020

Severance Costs

We incurred severance expenses of $0.7 million for the nine months ended September 30, 2021 and $1.6 million for the nine months ended September 30, 2020.

Interest expense

In Thousands Nine Months Ended September 30,

Interest Expense 2021 2020 $ Increase/(Decrease) % Change

Total Interest Expense $37,028 $33,443 $3,585 10.7 %

Interest related to derivatives* $11,034 $3,152

Interest related to amortization*** $2,725 $3,266

Adjusted Interest Expense $23,269 $27,025 $(3,756) (13.9) %

* Includes interest on derivatives not related to debt obligations.

** Includes interest related to our term loans, revolving credit line, notes, finance leases, and other

***Includes combined noncash amortization of deferred loan costs and discount on issuance of debt.

Excluding interest expense for derivatives and amortization for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, interest expense decreased $3.8 million, or 13.9% and relates to lowered variable LIBOR and Prime interest rates paid on our term loan and revolving debt.

See “Liquidity and Capital Resources” below for more details on our credit facilities.

Equity in earnings from unconsolidated joint ventures

For the nine months ended September 30, 2021 we recognized equity in earnings from unconsolidated joint ventures in the amount of $8.3 million and for the nine months ended September 30, 2020 we recognized equity in earnings from unconsolidated joint ventures of $5.2 million, an increase of $3.1 million or 59.6%.

The increase was mainly related to the equity in earnings received from our interest in the Arizona Diagnostic Radiology Group joint venture, which was formed in the fourth quarter of 2020.

Income tax expense

We recorded a provision for income tax of $12.5 million, or an effective tax rate of 22.6%, for the nine months ended September 30, 2021 compared to a benefit for income tax of $5.0 million , or an effective tax rate of 28.3% for the nine months ended September 30, 2020.

The income tax rates for the three and nine months ended September 30, 2021 diverge from the federal statutory rate due to (i) noncontrolling interests due to the controlled partnerships;

(ii) effects of state income taxes;

and (iii) excess tax benefits attributable to share-based compensation.

For the three months ended March 31, 2022 we recognized equity in earnings from unconsolidated joint ventures in the amount of $2.5 million and for three months ended March 31, 2021 we recognized equity in earnings from unconsolidated joint ventures of $2.3 million, an increase of $0.2 million or 10.2%.

The increase was mainly related to the equity in earnings received from our venture operations in Maryland.

Our AI segment develops and deploys clinical applications to enhance interpretation of medical images and improve patient outcomes with an emphasis on brain, breast, prostate, and pulmonary diagnostics.

We are developing our AI segment initially through acquisition activity.

Our acquisitions of Nulogix and Deephealth comprise the results for 2021.

Our 2022 results now include our recent additions of Aidence Holding B.V and Quantib B.V.

The breakdown of revenue and expenses of the segment for the three months ended March 31, 2022 and 2021 are as follows:

In Thousands Three Months Ended March 31,

2022 2021 $ Increase/(Decrease)

Revenue $599 $— $599

Loss from Operations ($5,617) ($1,354) ($4,263)

Other ($504) $200 (704)

Segment loss ($5,113) ($1,554) ($3,559)

Adjusted EBITDA

3 unchanged sentences

We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, each from continuing operations and excluding losses or gains on the disposal of equipment, other income or loss, loss on debt extinguishment, bargain purchase gains and non-cash equity compensation.

Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to noncontrolling interests in subsidiaries, and is adjusted for non-cash or

extraordinary and one-time events taking place during the period.

Adjusted EBITDA includes equity earnings in unconsolidated operations and subtracts allocations of earnings to noncontrolling interests in subsidiaries, and is adjusted for non-cash or extraordinary and one-time events taking place during the period.

We have not made specific adjustments to our calculation of Adjusted EBITDA in response to COVID 19.

Our net income (loss) reflected below includes the effect of revenue received under the Provider Relief Fund of $6.2 million and $25.7 million for the nine months ended September 30, 2021 and 2020, respectively.

Our net income reflected below includes the effect of revenue received under the Provider Relief Fund of $6.2 million for the three months ended March 31, 2021.

Adjusted EBITDA should not be considered a measure of financial performance under GAAP, and the items excluded from Adjusted EBITDA should not be considered in isolation or as alternatives to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity.

Adjusted EBITDA is not a measurement determined in accordance with GAAP and is therefore susceptible to varying methods of calculation, this metric, as presented, may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA is most comparable to the GAAP financial measure, net income (loss) attributable to RadNet, Inc.

Adjusted EBITDA is most comparable to the GAAP financial measure, net income attributable to RadNet, Inc.

common stockholders.

The following is a reconciliation of GAAP net income (loss) attributable to RadNet, Inc.

common stockholders to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020, respectively.

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net income (loss) attributable to RadNet, Inc.

The following is a reconciliation of GAAP net income attributable to RadNet, Inc.

common stockholders to Adjusted EBITDA for the three months ended March 31, 2022 and 2021, respectively.

Three Months Ended March 31,

Net income attributable to RadNet, Inc.

common stockholders $ 3,013 $ 9,458

Provision for (benefit from) income taxes 5,284 3,825 12,534 (5,029)

Provision for income taxes 1,496 4,376

Interest expense 11,593 12,826

3 unchanged sentences

Loss (gain) on sale and disposal of equipment and other 1,128 (1,307)

Debt restructuring and loss on extinguishment expenses — — 6,044 —

Non-cash change in fair value of interest rate hedge (20,819) (11,245)

Other adjustment to joint venture investment — — (565) —

Other expenses 165 206

Adjusted EBITDA $ 62,285 $ 45,809 $ 164,415 $ 88,763

Legal settlements 2,197 —

Non operational rent expenses 938 —

Gain on sale of equipment attributable to noncontrolling interest

Adjusted EBITDA including losses from AI Segment & Provider Relief Funding $ 38,132 $ 45,503

Provider relief funding — (6,248)

Adjusted EBITDA including losses from AI Segment and excluding benefit from Provider Relief Funding $ 38,132 $ 39,255

Losses from AI Segment 3,585 811

Adjusted EBITDA excluding losses from AI Segment & Provider Relief Funding $ 41,717 $ 40,066

Liquidity and Capital Resources

The following table summarizes key balance sheet data related to our liquidity as of September 30, 2021 and December 31, 2020 and income statement data for the nine months ended September 30, 2021 and 2020 (in thousands):

The following table summarizes key balance sheet data related to our liquidity as of March 31, 2022 and December 31, 2021 and income statement data for the three months ended March 31, 2022 and 2021 (in thousands):

Balance Sheet Data:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 70,713 $ 134,606

2 unchanged sentences

Stockholders' equity 421,450 346,157

Income statement data for the nine months ended September 30,

Income statement data for the three months ended March 31,

Total net revenue $ 341,767 $ 315,319

Net income (loss) attributable to RadNet common stockholders 28,550 (20,797)

Net income attributable to RadNet common stockholders 3,013 9,458

We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations.

In addition to operations, we require a significant amount of capital for the initial start-up and development of new diagnostic imaging facilities, the acquisition of additional facilities and new diagnostic imaging equipment.

Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties.

During the nine months ended September 30, 2021 we had a substantial acceleration of procedure volumes compared to the prior year.

Net income from the period, together with proceeds from the refinance of our credit facility has resulted in substantial improvement of our working capital position compared to December 31, 2020.

However, as noted in our forward looking statements, we are uncertain of the duration and ultimate severity of the effects of the COVID 19 pandemic on our business.

Although we have received government stimulus funding and are undertaking measures to reduce operating expenses, we may again experience operating losses as a result of the pandemic which can impact both the consumption and cost of our medical imaging services.

In addition to operations, we require a significant amount of capital for the initial start-up and development of new diagnostic imaging centers, the acquisition of additional centers and new diagnostic imaging equipment.

Because our cash

flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties.

We have credit available from our current credit facilities and borrowing under those facilities is subject to continued compliance with lending covenants.

6 unchanged sentences

Sources and Uses of Cash

The following table summarizes key components of our sources and uses of cash for the nine months ended September 30, 2021 and 2020:

Cash Flow Data September 30, 2021 September 30, 2020

The following table summarizes key components of our sources and uses of cash for the three months ended:

Cash Flow Data March 31, 2022 March 31, 2021

Cash provided by operating activities $ 901 $ 28,084

Cash used in investing activities (61,564) (87,348)

Cash provided by (used in) financing activities 108,478 (33,495)

Cash provided by operating activities for the nine months ended September 30, 2021 was $100.3 million and $170.3 million for the nine months ended September 30, 2020.

Our cash provided by operating activities for the period ended September 30, 2020 was benefited by the receipt of $39.5 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the nine months ended September 30, 2021, included purchases of property and equipment for approximately $88.5 million and the acquisition of imaging business and other assets for $70.1 million.

Cash used in financing activities (3,313) (11,651)

Cash used in operating activities for the three months ended March 31, 2022 was $0.9 million and cash provided by operation activities was $28.1 million for the three months ended March 31, 2021.

Our cash provided by operating activities for the three months ended March 31, 2022 was affected by the non-cash change in fair value of our interest rate hedge of $20.8 million.

Our cash provided by operating activities for the period ended March 31, 2021 was benefited by the receipt of $39.6 million in CMS advances recorded as deferred revenue.

Cash used in investing activities for the three months ended March 31, 2022, included purchases of property and equipment for approximately $36.6 million and the acquisition of imaging business and other assets for $25.1 million.

As part of our business operations we continually evaluate investment opportunities.

Cash provided by financing activities of $108.5 million for the nine months ended September 30, 2021, was due to refinancing of our term loan obligations with the Second Amended and Restated First Lien Credit and Guaranty Agreement on April 23, 2021.

Cash used in financing activities of $3.3 million for the three months ended March 31, 2022, was due to payment on our term loan obligations.

Please see Note 6, Credit Facilities and Notes Payable in the notes to consolidated financials statements for more information.

2 unchanged sentences

Payments on the associated notes receivables will be reflected as operating activities on our statement of cash flows and on our balance sheet as prepaid expenses and other current assets for the current portion and deposits and other for the long term portion.

At September 30, 2021 we have $18.3 million, net of discount, remaining to be collected on these agreements.

At March 31, 2022 we have $17.0 million, net of discount, remaining to be collected on these agreements.

We do not utilize factoring arrangements as an integral part of our financing for working capital.

2 unchanged sentences

The Barclays credit facilities are comprised of first lien term loans and a revolving credit facility of $195.0 million.

The SunTrust credit facilities are

comprised of a term loan and a revolving credit facility of $30.0 million.

As of September 30, 2021, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at September 30, 2021, net of accumulated amortization, was $2.3 million and is specifically related to our Barclays revolving credit facility.

Included in our condensed consolidated balance sheets at September 30, 2021 are $771.2 million of total term loan debt (exclusive of unamortized discounts of $14.3 million) in thousands:

The SunTrust credit facilities are comprised of a term loan and a revolving credit facility of $30.0 million.

As of March 31, 2022, we were in compliance with all covenants under our credit facilities.

Deferred financing costs at March 31, 2022, net of accumulated amortization, was $2.0 million and is specifically related to our Barclays revolving credit facility.

Included in our condensed consolidated balance sheets at March 31, 2022 are $764.6 million of total term loan debt (exclusive of unamortized discounts of $12.7 million) in thousands:

Face Value Discount Total Carrying

2 unchanged sentences

Total Term Loans $ 764,563 $ (12,692) $ 751,871

At September 30, 2021, we had no borrowings under our Barclays or SunTrust revolving credit facilities.

At March 31, 2022, we had no borrowings under our Barclays or SunTrust revolving credit facilities.

After reserves for outstanding letters of credit of $7.8 million on our Barclays Revolving Credit Facility, we have $187.2 million available for borrowing and $30.0 million available under our SunTrust Revolving Credit Facility.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis